EMEA Location Trends

1. GCS Consulting EMEA Location Trends October 14th, 2009

2. Agenda • Introduction • Overview of EMEA Offshoring Market • Central and Eastern Europe • Where in EMEA? • Comparison of CEE Offshoring markets • Country Focus- Latvia • Latvia- Salary Movement and Arbitrage Opportunity • Country Focus- Bulgaria • What is next in EMEA? • Q&A

3. Overview of the Offshoring Market in EMEA • Constrained activity in EMEA in BPO Outsourcing - Q1 2008 to current • Market represents similar signs to 2007 • H1 2008 argued to be an anomaly • Market Uncertainty • Decision making delays • Economy should act as catalyst for cost savings and efficiency gains- Has had opposite effect • First 6 months of 2008 saw record levels of activity • Compared to this, we have seen 19% fewer contracts with a 45% decrease in TCV (TPI) • Weakness is across all regions, including CEE and all functions: • FM has seen 90% Y-O-Y drop in TCV

4. Overview of the Offshoring Market in EMEA • The only major deal in 2009 in EMEA BPO has been AXA-Capita contract • Outsourcing of policy administration- Annual Net Save- £30m • During 2008 – 2009 there have been limited fresh investments in offshoring back office operations to CEE, though there is an expectation that the financial services sector will invest 40 – 45 times the current market size over the next 5 years (Everest Institute). • Countries continue to offer competitive fiscal and other investment incentives to lure foreign investment • There are still positives: • Outsourcing levels increased over 2008-2009 in: • Diversified Financials • Consumer Durables • Utilities • Telecommunications • There is activity- 2/3rds of UK firms have offshored at least some of their IT functions in H1 2009 • 79% said India was location of choice • But also negatives! • Slump in activity in: • Banking • Oil and Gas • Aerospace and Defence • Food, Drink, Tobacco

5. Central and Eastern Europe • Potential labour arbitrage opportunity of 65% - 85% in CEE for German/UK operations • Poland - 65% • Hungary – 68% • Czech Republic – 72% • Russia – 76% • Romania – 84% • Poland continues to rank #1 in labour pool availability with an approximate supply of c.400,000 fresh graduates per annum, followed by Romania and Czech Republic. • Romania has a larger population than Hungary, Czech and Slovakia. • Very attractive for BPO set-up

6. Estonia Latvia Lithuania Poland Germany Ukraine Czech Republic Slovakia Austria Hungary Romania Slovenia Croatia Bosnia Serbia Bulgaria Montenegro Macedonia Albania Where in EMEA?

7. Where in EMEA?

8. Comparison of the Key CEE Offshoring Markets

9. The Second Wave?

10. Country Focus- Latvia

11. Latvia LABOR AVAILABILITY • Population: 2,276,100 • Working Age: 1,497,479 • Unemployment Rate 6.1% • Availability of English speakers 39% • Main cities • Riga 717,371 • Liepaja 85,050 • Jelgeva 65,635 • 54.4 University students per 1000 inhabitants • Total students- 125,350 • English, Russian and Germany spoken in schools • 70% of under 40’s speak English • Main Universities • Riga Technical • University if Latvia • Riga Stradina University • Latvia University of Agriculture • Tieto Shared Service Centre in Riga COLLEGES & UNIVERSITIES STRENGTHS • Economy has one of the highest growth rates in Europe • Ease of Doing Business is 29/181 • EU Structural Fund Incentives available depending on project • Excellent transport links • Low salary costs • Low corporate income tax- 15% • Economic challenges due to climate • Rising unemployment levels- 12.7% by 2011 • Main sectors effected by downturn- Construction, Production and Trade Sectors WEAKNESSES RECENT DEALS

12. Latvia: Competitive position with other CEE countries

13. Latvia: Average Monthly Gross Earnings and Labour Costs in the main cities Difference of €300 per month on Gross Earnings and €400 per month on Labour Costs

14. Gross Monthly salary in EUR for key positions in Financial Shared Service Centres

15. Country Focus- Bulgaria

16. Bulgaria LABOR AVAILABILITY • Population: 7,606,600 • Working Age: 4,830,159 • Unemployment Rate 6.6% • Availability of English speakers 23% • Main cities • Sofia 1,240,788 • Plovdiv 705,121 • Varna 459,613 • Number of graduates – 78,332 • Main universities and higher education • Sofia University • New Bulgarian University • Trakia University • Tech University of Sofia • American university in Bulgaria • HP- Global Support Centre (400) • IBM- Procurement (tbc) • MoneyGram- Customer Support Centre (70) COLLEGES & UNIVERSITIES STRENGTHS • With Romania it is newest member of EU (2007) • Popular destination for international distribution companies operating in Asia and Europe • Ease of Doing Business is 28/181 • EU Structural Fund Incentives available depending on project • 13th in AT Kearney rankings • Shared Service Centre's offer English, Russian, Polish, German and Scandinavian • Economic challenges due to climate • Competition from Baltic republics- Lithuania has made significant growth in annual rankings WEAKNESSES RECENT DEALS

17. What is Next in EMEA? • Poland/Czech Republic/Hungary reaching saturation on labour costs • Romania and Bulgaria emerging as credible locations • Latvia/Lithuania South Africa/Egypt/Morocco creating noise • Supporting operations in France/UK due to similar time zones • ITO is booming more than BPO in EMEA • Big Question- Where are EU Incentives? • Labour Arbitrage moving away from Poland, Czech Republic and Hungary to Romania, Bulgaria and Baltic States • CBRE Clients looking at usual criteria: • Low labour costs • Skilled Labour set • Language Availability • Incentives • Our focus is now on how we offer our “Cradle to Grave” Corporate Services offering to them.

18. CB RICHARD ELLIS GCS EMEA Consulting For more information, please contact: Ashu Kaushal Associate Director +44 (0)207 182 3033 ashu.kaushal@cbre.com Jamie Murray Head of Location Analysis-EMEA +44 (0)207 182 3346 jamie.murray@cbre.com Contact Information